As Portland’s Conversion Boom Slows, What’s Next for the Downtown Office Market?

By Nate Stevens |Managing Partner, Designated Broker

Over the past several years, Portland, ME lead New England’s office-to-residential/hospitality conversion trend as older office buildings were reimagined as apartments, educational facilities, and boutique hotels. Since 2020, The Boulos Company has removed more than 600,000 square feet of downtown office space from our annual office market survey, a practice that occurs when a space is permitted for non-office redevelopment or if we are certain the building will no longer service the office market.  

While many cities throughout the region grappled with rising post-pandemic office vacancies, developers in downtown Portland managed to start or complete 14 projects over the past six years. Despite this momentum, the conversion boom appears to be losing steam. Only one building in downtown Portland received permits in 2025 for a conversion and it’s still unknown if the project will move forward. Among the concerns are high construction costs, tighter financing standards, housing and hospitality oversupply, municipal regulations, and most importantly, a dwindling supply of suitable buildings. As a result, the office market is now entering a period in which it must, once again, stand on its own without the drive and support that conversions provided. 

We can point to several successful projects including East Brown Cow’s redevelopment of 178 Middle Street and 131 Middle Street as part of their Docent Collection; 465 Congress Street, a boutique hotel conversion under construction by Fathom Companies; and 50 Monument Square and 482 Congress Street, both former office buildings which partially turned apartments.  

The scale of Portland’s conversion wave is even clearer when you look at the data. The 600,000 square feet removed from the office survey represents about 25% of the downtown Class B inventory, or 13.5% of the entire downtown office market, a level of transformation far beyond what other New England cities experienced. By comparison, Boston converted roughly 3.6% of its downtown inventory into housing. Portland’s conversions directly contributed to Class B vacancy dropping from 13.3% to 8.8% between 2020 and 2024. 

But these success stories also illustrate how complex, time-consuming, and capital-intensive these transformations are; adaptive reuse to alternative uses is a complicated project from both a financial and structural standpoint. Converting an aging office building typically requires stripping it to the core and rebuilding almost everything inside: life safety systems, plumbing, HVAC, electrical, and more. Unit layouts and hotel rooms are even more involved than your typical office space, and the cost of this kind of work has risen dramatically. Higher interest rates and caution around these types of projects has also made these conversions a very difficult sell to lenders.  

Market demand and municipal policy also played a role in the deceleration. Between 2023 and 2024 alone, roughly 600 new housing units were slated to enter the downtown market simultaneously. Developers worried that this sudden influx could temporarily saturate demand while inclusionary zoning and rent control added further pressures.  

The biggest factor in the slowdown may simply be that Portland has already converted the buildings that were best suited for redevelopment, those with high vacancy combined with the structural components for a successful conversion. Many remaining buildings are simply not good candidates for conversion. 

As The Boulos Company prepares its annual Market Outlook, a key question will be how the slowdown in new conversion activity impacts the downtown Class B market. With tenants continuing their “flight to quality” and are favoring upgraded Class A buildings in stronger locations, the lack of fresh adaptive reuse projects may place new pressure on older Class B assets that can no longer rely on conversion as an exit strategy. The demand for housing remains, but there may be too many hurdles for developers to meet demand.  

Portland’s conversion boom reshaped the city. The next phase will determine how its office market adapts now that the easiest—and best—conversion opportunities have already been claimed.